Do entrepreneurial businesses need an FD?

Do entrepreneurial businesses need an FD? The question is more divisive than one might imagine. Financial Director blogger Maurice O’Shea wrote about this on financialdirector.co.uk recently and received a flurry of responses.

“Looking back over the businesses I have met in the last three months, I’m surprised how often management accountants fail to provide essential commercial information. I’m working with profitable, well-run businesses that have survived and grown over the last two years – and they are businesses that do not have a high-calibre finance director,” O’Shea writes of his experience as an FD for a portfolio of growing businesses.

“It is my belief that entrepreneurial businesses need an FD more than those that are not,” Martin Haywood, a divisional FD at Alcon Components comments in response. “The FD attributes need to be somewhat entrepreneurial rather the traditional role of saying no.

“An FD complementing the entrepreneur is a key element to the balance between business growth in a controlled framework, appeasing the needs of other stakeholders to whom, it may be considered, the entrepreneur pays lip service – in other words, a great tag team,” he says.

Non-supporting role

And it is teamwork with the FD that O’Shea observed as lacking from growing businesses he has worked with. “[MDs of growing businesses] are so unsupported by their FDs and accountants,” he wrote.

“One MD of an £8m business takes two hours each day to produce and manage his cashflow forecast. He had hired two FDs in a row who had spent months advising him how to raise the finance necessary to provide the working capital needed to grow his business, and he wanted a chunk of equity. He still didn’t know what good financial controls and reporting looked like.”

The FD and the entrepreneur “have to be a double act; they have to be on the same wavelength and work exceptionally well together”, adds Linda Andrews, FD for Glasgow-based Eurofriction. “An entrepreneur tends to be a creative, sales-led individual who needs accurate, timely, commercially focused financial information in order to make the right deals.”

Steve Waldron, financial controller at London-based Grange Hotels, summed it up. “Entrepreneurs are precisely the breed that needs someone to point out that ‘the emperor has no clothes’, to quote the fairytale – or indeed, as Sir Humphrey would say, ‘that’s a very brave decision, minister’. They traditionally have a short attention span and need the kind of due diligence that a financial man can supply.” 

Maurice O’Shea is managing principal for the South East at the FD Centre. Read the full blog and comments here